Carl Sagan Was Right...

There are billions and billions of "stars."

We're not talking about stars in the literal sense, but in the personal sense. The rapid advance of technology is making billions and billions of consumers "stars", and changing the world in the process.

Let's look back at the history of the telephone industry.
In the early 1900's, we had:

Making Sense of Sensors

We continually monitor developments in the Wireless space, looking for great investment opportunities. One of the remaining segments with the biggest market potential is at the lowest end of the data rate and power curves -- small, low-power, wireless sensors. Market research firm ON World estimated that wireless sensor networks generated less than $150 million in sales in 2003, but will top $7 billion by 2010. The revenue opportunity for just the semiconductor components of these tiny sensors will reach >$1billion by 2010.

The evolution of standards and lower prices are fueling the rapid growth of wireless sensor networks in a wide range of applications such as:

• industrial controls
• building automation
• automatic meter reading
• patient monitoring
• homeland security

ZigBee is a new standard focused just on low-power, low-bandwidth wireless apps. There are >100 member companies in the ZigBee consortium and products are beginning to get traction in the marketplace. There also are a number of firms focused on leveraging the strong Wi-Fi momentum and existing infrastructure to develop low-power wireless sensor networks.

So which approach is best -- ZigBee, Wi-Fi or proprietary solutions? We've learned from extensive due diligence research on several start-ups that the answer varies depending on the end-user market segment.

• ZigBee products are best for home automation and consumer products
• Defense and other organizations doing extensive video monitoring may still require proprietary wireless solutions.
• But for industrial and other commercial customers who have already invested a lot in their wireless networks, a solution that leverages their Wi-Fi investments is the best alternative.

Several potential customers told us that even though ZigBee sensors are very inexpensive, it is costly to build and support a second wireless network in their facilities. In addition, the ZigBee methods for providing security, reliability and robustness have not matured enough yet to meet enterprise and industrial requirements. It took >5 years for these key features to evolve for the Wi-Fi standard. There's nothing like talking with prospective customers to ensure that we're investing in the best alternative for an emerging market! We recently made our bet in the low power wireless space. See "Living The Dream" below for more details on Gainspan.

Planning for a successful 2007

This time of year, all our portfolio companies are wrapping up their calendar 2006 progress reports, and planning for 2007. As always, some have made plan in 2006 and are looking forward eagerly to the new year. Others are resetting expectations and budgets in the downward direction.

While every story is different, there are some common themes that differentiate those with green lights on our internal monitoring system, and those with yellow or red.

First and foremost, the portfolio companies that have executed closest to plan have (shockingly) been the most conservative in putting a plan on the table in the first place.

What? Is this a call for startups to back off their audacious growth plans? Yes, it is!

One of the most common failings we see are portfolio companies that consistently make plans that they then don't make. And when they miss target, all sorts of bad things start to happen.

Expenses end up leading revenues rather than lagging them. Cash disappears like hailstones on a summer evening. And perhaps most damaging, employees get the sense that not meeting plan is OK. "Gosh, we missed plan and the management team still has their jobs. So, it must be fine for us not to make plan, too." That cultural norm is deadly.

As investors and board members, we know that almost any growth plan for a startup has more risk in it than anyone can quantify. If the known risks don't get you, the unknown ones will. So, we strongly encourage our portfolio companies to "Make a plan that you can make!" If, over the course of the first quarter or half year it becomes apparent the firm can beat the plan - terrific. We'll relax the expense controls, hire more people, buy more equipment, whatever. We might even spring for bonuses!

For most of us, success is not measured by how much you grew, but how well you did versus plan. As long as you are growing nicely, it is the trend that matters more than the absolute value of the numbers.

So make a plan you can make, and 2007 will be a successful year.

Many years ago, OVP recognized the large strategic asset in our backyard in Oregon: Intel's huge Hillsboro operation. From our deep relationship with Intel comes yet another project, this one of the first investments out of OVP VII. Gainspan Corporation, (headquartered in Silicon Valley, with a significant development effort in India) has been spun off by Intel to give it the ability to attack the opportunity for low-power 802.11 applications.

OVP co-led the $10.5M Series A round, along with New Venture Partners and Sigma. John Hull has joined the Gainspan board for OVP, backed up by Dr. Rick LeFaivre.